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In November 2001, The New York Times declared: “Dot-com is dot-gone, and the dream with it.” Three years later, Mark Zuckerberg launched Facebook from his Harvard dorm room.
The internet’s rise, fall, and eventual resurgence hold an important lesson for today’s skeptics of cryptocurrency: tech innovation often follows a predictable pattern, and crypto’s golden days may just be ahead.
The public’s response to new technology often follows a predictable “hype cycle,” defined decades ago by the Gartner consulting firm. It starts with a pop of inflated expectations–the hype that new technology will transform everything. But when the new technology is inevitably abused by bad or marginal actors, public opinion quickly declines into a “trough of disillusionment.”
Eventually, innovators and policymakers work together to promote the good uses of technology and restrict the abuses and excesses, reaching a “plateau of productivity.”
Working at the company Lime, I watched policymakers struggle with this cycle only a few years ago with the introduction of e-scooters across cities. After initial hype around their introduction, I saw many local legislators jump to ban them after the first accident or first scooters tossed into the local river. It’s a tempting reaction–but it’s unwise if you consider the cycle of technological innovation. What policymakers failed to see was that the adoption of new technology is never linear and that the inevitable small number of bad actors is manageable.
Similarly, the early days of Internet policy were littered with bad ideas that were the precursor to better ones. Kozmo.com flopped but led to the more durable Doordash and Grubhub model. Napster and Kazaa violated copyright laws but showed that consumers wanted a better way to consume music, so iTunes and Spotify were born.
Crypto is no different. While clear regulation is needed, policymakers must be cautious not to overreact to the recent downturn, or risk missing out on the next Doordash, iTunes, or Spotify.
A year ago, crypto ads dominated the Super Bowl and Web3 was the frothy buzzword du jour. Proponents of a decentralized banking system proclaimed that the up-and-coming industry was going to solve every problem under the sun, from bridging global wealth disparities to unifying the Internet of Things. Optimism about the growing digital assets industry even spurred a rare bipartisan “crypto caucus” in Congress.
That was the peak of inflated expectations. And that’s OK–techno-optimists should get excited about the potential of the next new thing.
But now it’s clear the industry has entered a rough patch. Bitcoin has slumped in value, the industry has undergone large layoffs, and the arrest of FTX founder Sam Bankman-Fried has captured global attention.
However, that doesn’t mean we should throw in the towel.
The crypto industry, too, can rebound and emerge better than before. Like Facebook’s rise after the dot-com bubble burst, the killer app for Web3 may not have even been invented yet. Mastodon, which was created in 2016 as a decentralized alternative to Twitter, only recently gained traction.
In the case of scooters, cities that stuck it out through the trough of disillusionment and eventually learned ways to regulate the use of these vehicles, built scooter parking areas to clear sidewalks, and found an equilibrium where e-scooters now provide essential transportation for residents and negative effects are mitigated.
Similarly, we shouldn’t be conducting a postmortem on the crypto industry just yet. We should focus on developing needed regulations while avoiding policy overcorrection. Some policymakers are already gearing up to crack down on the crypto industry, and they need to be careful not to overregulate to the point of preventing crypto’s maturation.
So, let’s punish the bad actors–harshly. Let’s enact new regulations to promote responsibility. And let’s retain a sense of optimism about the new services that decentralized technologies will eventually bring.
Adam Kovacevich is the founder and CEO of Chamber of Progress.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
